Yahoo will provide search and display advertising for AT&T customers on mobile devices and PCs. As part of the deal, the search engine will create a new look and feel for the carrier's Web portal.

The agreement also creates new advertising-based revenue opportunities for both companies from search and display capabilities from either a mobile handset or a PC.

AT&T spokesperson Jenny Parker says that while the agreement paves the way for an "even richer and more innovative online experience for consumers, it also reflects the changes in the marketplace where search, advertising and mobile have become increasingly important growth areas."

Consumers also benefit, Parker says. The new att.net portal will allow AT&T wireless customers--even those who don't subscribe to the carrier's Internet service plan--to establish att.net e-mail addresses. All of AT&T's 14.2 million broadband customers will gain access to co-branded versions of Yahoo's mobile Web properties and the Yahoo! Go application.

Yahoo also will become AT&T's provider for search and display on both mobile devices and the PC; and yellowpages.com becomes the lead local search engine on both screens as well.

As for AT&T U-verse TV customers, they will continue to have access to Yahoo content through the service's interactive AT&T U-bar feature, where available. The AT&T U-bar enables subscribers to view stock quotes, weather forecasts, traffic information, and sports scores on their TV screens in an area below the program they're currently watching, without interrupting their program. While this feature provides Yahoo content to U-verse subscribers, it doesn't provide opportunities for marketers.

Meanwhile, Yahoo on Tuesday confirmed it would cut 1,000 employees, or 7% of its workforce, in the coming quarter. The search engine has experienced increasing competition with Google. Yahoo's reported net income for the fourth quarter fell to $206 million--or 15 cents per share--from $269 million, or 19 cents a share, in the year-ago quarter. Revenue rose 8% to $1.8 billion.

Research firm eMarketer says Google took 75% of U.S. paid search advertising in 2007, up from 60% in 2006. Yahoo, ranked No. 2, raked in 9% share, with other search engines splitting the 16% of the pie. U.S. online ad spending should reach $42 billion in 2011, up from $27.5 billion in 2008. Compare that with U.S. search ad spending reaching $16.6 billion in 2011, up from $11 billion in 2008.

This news story is important. I recommend that everyone read it.